Carmaker’s heft in blue-chip index expected to trigger billions of dollars in trading
Tesla’s inclusion in the S&P 500 next month is set to trigger a frenzy of trading, with Wall Street bracing itself for billions of dollars in shares to change hands when the stock enters the index.
The electric carmaker’s debut on the S&P 500 will be the biggest on record, instantly making Elon Musk’s company one of the largest weights on the blue-chip US stock index. A boom in passive investing — in which funds seek to reflect the performance of an index — has magnified the effect the move will have on the broader market, industry participants said.
Passive funds with $4.59tn in assets, such as those run by Vanguard and Fidelity, track the S&P 500, according to data compiled by Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. Tesla’s inclusion on the index would create some $51bn of demand for shares from these investment vehicles, he said.
Another $6.7tn in actively managed funds use the S&P 500 as their benchmark. Strategists with Goldman Sachs estimated that of the 189 large-cap funds they tracked, 157 with $500bn of assets in total did not own Tesla at the start of the fourth quarter. Analysts say these funds will add fervour to the buying of shares as they seek to rebalance their portfolios.